CFTC Orders JPMorgan to Pay $100 Million for Failing to Monitor Billions of Client Orders

The Commodity Futures Trading Commission (CFTC) recently ordered JPMorgan to pay $100 million in order to settle a CFTC probe. The probe concluded that the bank failed to monitor billions of client orders that passed through its systems over a seven-year period between 2014 and 2021.

A seven-year-long oversight

The order says that JPMorgan uncovered that its surveillance of trading on multiple trading systems and venues operated incorrectly. The discovery was made in 2021 when the bank wanted to onboard a new trading exchange.

As a result, the bank experienced massive surveillance gaps, which caused additional problems. The issue arose due to the failure to configure certain data feeds and ensure complete trade and order data was being ingested by the bank’s surveillance tools.

In one US-designated contract market, JPMorgan failed to ingest billions of messages about orders that passed between 2014 and 2021.

The bank has since admitted to some of the charges brought up by the regulator. Initially, the CFTC hit the bank with a penalty that was twice as large — $200 million. However, because of previous settlements with the OCC and the Federal Reserve, the CFTC was willing to offset $100 million, effectively cutting the amount in half.

As for the previous settlements, the US Fed and the OCC issued fines that obligated JPMorgan to pay over $300 million in total

JPMorgan admits compliance failure

Commenting on the issue, JPMorgan said that its team self-identified the problem, and has taken certain significant remedial actions already. Additional remedial actions are on their way as well. Furthermore, the bank conducted its own thorough investigation, not finding any traces of employee misconduct or harm to the clients or the market.

In other words, this appears to be a true oversight of a legitimate error that was never exploited, and that never caused harm to anyone involved. However, it is still a significant issue, which is why the bank is not trying to fight the CFTC’s decision to fine it.

CFTC Commissioner Kristin N. Johnson said in a statement last Thursday that the regulator will also appoint a compliance monitor as part of the additional undertakings that the regulator required.

Johnson further said: “J.P. Morgan admits notable compliance failures. Admissions comprise a critical component in remediation efforts and may foster deterrence. All too often, and in far too many instances, enforcement matters are resolved without an acknowledgment of the mistakes, misconduct, or compliance failures at the center of the enforcement action.”